Retailers dropping prices on iPhone ahead of impending update

Target and Radio Shack are offering decent discounts on new iPhone 4 models, a …

Some retailers have begun marking down the price of the iPhone 4, suggesting stock clearing measures have begun in anticipation of an expected hardware update. While most recent rumors have suggested a September launch, however, some recent buzz indicates that the next iPhone might not emerge until October. Still, in light of the markdowns, September seems a more likely candidate.

According to reports from Engadget and Phone Arena, both Radio Shack and Target planned to offer between $30 and $50 off of the price of an iPhone 4 with a two-year contract. We verified Monday morning that Radio Shack has a current promotion running through Saturday, offering the iPhone 4 for $169.99 and $269.99 for the 16GB and 32GB models, respectively. Radio Shack is also offering up to $100 credit for the trade-in of a previous iPhone model, dropping the price to as low as $69 with contract.

We also spoke to contract phone sales representatives from Chicago-area Target stores, who confirmed that the iPhone 4 can be had for $149.99 or $249.99 for 16GB or 32GB models with a two-year contract. Leaks over the weekend suggested Target may have different pricing depending on whether the iPhone was activated with AT&T or Verizon, but we were told that the price applies to both carriers. Target also offers trade-in credit for used iPhone models as well as other mobile electronics and even used games; one representative encouraged bringing in any unused electronics and games for potential trade-in credit.

Checks with AT&T and Verizon showed both carriers are still offering the typical $199/$299 pricing for new iPhone models on contract, and we haven't heard about price drops from other retailers. However, the price drops from both Radio Shack and Target suggest that those retailers are hoping to move remaining stock in advance of an expected fall launch for an updated iPhone.

Most rumors have indicated that updated iPhone hardware will include an updated A5 dual-core processor. The phone may also feature a dual-mode Qualcomm chip allowing Apple to sell a single device for use on both Verizon and AT&T in the US, which would also make it easier for customers to use iPhones internationally while traveling. It could also feature an updated camera as high as 8 megapixels.

Externally, the new iPhone is expected to remain largely the same as the iPhone. However, some rumors have suggested a radically new, thinner form factor with a screen as large as 4 inches.

The new iPhone should also run iOS 5, the next major update to Apple's mobile operating system. The update will include an overhauled notification system, the ability to sync with Macs and PCs wirelessly, and can be upgraded over the air without plugging in to a computer. Improved messaging, Twitter integration, and tabbed Safari browsing will also make an appearance, in addition to numerous other smaller features.

Apple has targeted the release of iOS 5 for sometime in fall, which has led most within the tech industry to believe Apple would reveal the updated hardware around the time of its usual September iPod announcement. Other rumors have lent credence to that suspicion, including the fact that AT&T has informed retail employees that vacation time will be locked out the last two weeks of September. However, All Things Digital reported on Monday that its sources "with knowledge of the situation" say the launch will happen in October, perhaps in the latter part of the month.

Given the discounts that Target and Radio Shack are offering, we still (cautiously) believe the launch will happen sooner rather than later. A September launch would also allow Apple to report the typically high launch sales numbers as part of next quarter's financial results. Such a boost would be helpful for Apple's market share numbers as iPhone sales have historically tended to drop shortly before a new model is released. A recent survey by Piper Jaffray analyst Gene Munster indicated that pent-up demand for an updated iPhone, especially among Verizon users, could be "stronger than expected."